Objectivity and Conflicts of Interest

Question 1

When a conflict of interest arises, when should a member take action to address this and preserve independence?

Answer 1

Immediately

Question 2

What should you do when faced with a conflict of interest?

Answer 2

Take action to preserve professional independence

Confirm how the conflict is handled in writing to the client

If no appropriate action can be taken to remove the threat, cease to act

Question 3

What should you do when acting for two long-standing clients who are parties to the same transaction?

Answer 3

Disclose all relevant facts to both parties

Use ethical walls

Question 4

What should you do when acting for two long-standing clients who are parties to the same transaction?

Answer 4

Disclose all relevant facts to both parties

Use ethical walls

Question 5

What happens if a person is asked to act for an individual with whom they have already entered into a loan transaction with?

Answer 5

There is a perceived conflict of interest

Any decision on how to handle the conflict should be documented

Question 6

Which fundamental principle is most likely to be threatened when a tax adviser encounters a conflict of interest?

Answer 6

Objectivity

Question 7

Where a conflict of interest involves two clients with opposing interests that cannot be resolved, what is the safest course of action for the tax adviser acting for them both?

Answer 7

Decline to act for one or both clients

Question 8

Where potential conflicts of interest for a tax adviser are concerned, or what significance are the perceptions of outsiders?

Answer 8

Outsiders perceptions are relevant since both actual and perceived conflict of interest need to be avoided and resolved

Question 9

True or false, a divorced couple who still work amicably together are seeking tax advice in relation to their business, this would threaten independence

Answer 9

False

Question 10

True or false, a husband of your line manager is seeking personal tax advice and hoping you will share the salary of his wife, this would threaten independence

Answer 10

True

Question 11

Two of your personal tax clients are tendering for the same lucrative business and seeking VAT reg advice, is this a conflict of interest?

Answer 11

Yes

Question 12

A junior at your firm is applying for a mortgage and has asked for a letter confirming her salary, is this a conflict of interest?

Answer 12

No

Question 13

If you are approached to act for a competitor of your client, what should you do?

Answer 13

Refuse to act for the competitor

Question 14

If a member becomes aware that two existing clients are both parties to a transaction which will bring them into conflict, what is the most sensible first step to take?

Answer 14

Inform both clients of the conflict

Question 15

You are advising two sisters who have inherited property. They are in a disagreement with what to do with their inheritance. What should you do?

Answer 15

Continue to act unless the dispute seems to present an insurmountable conflict of interest

Question 16

When considering an instalment arrangement with a client for a fee payment, what should you consider?

Answer 16

The consumer credit act

Question 17

Your client asks you to act as a guarantor in respect of a business loan from his bank, what does this mean for your work?

Answer 17

This would present a COI and guaranteeing could impair objectivity

Question 18

What should you do when independence is impaired and two conflicting clients want your advice?

Answer 18

Act for the client that contacted you first and confirm this to both clients in writing

Question 19

What is the definition of ethical walls?

Answer 19

Separate teams within the same firm of tax advisers who deal with two or more clients. Strict confidentiality of information is maintained.